Gold Analysts Most Bearish Since June on Stimulus: Commodities

The metal is heading for its worst year in three decades, spurring losses for mining companies from AngloGold Ashanti Ltd. to Barrick Gold Corp., as investors lost faith in bullion as a store of wealth.

(To get alerts for Commodities columns: SALT CMMKT. For more on the gold bear market, see EXT5.)

Aug. 9 (Bloomberg) -- Gold traders are the most bearish in seven weeks as investors weigh when the Federal Reserve will reduce bond purchases and holdings of the metal in exchange- traded products dropped to a three-year low.

Fourteen analysts surveyed by Bloomberg expect prices to fall next week, nine were bullish and seven neutral, the largest proportion of bears since the week ended June 21. Investors reduced holdings in gold ETPs by the most in a month on Aug. 7, data compiled by Bloomberg show. Speculators’ holdings of short contracts, or bets on lower prices, rose the most since mid-June last week, according to government data.

The metal is heading for its worst year in three decades, spurring losses for mining companies from AngloGold Ashanti Ltd. to Barrick Gold Corp., as investors lost faith in bullion as a store of wealth. Gold jumped 70 percent from December 2008 through June 2011 as the Fed bought more than $2 trillion of debt in a process known as quantitative easing. Three regional Fed presidents said this week less stimulus may be warranted.

"It’s now more a question of when, not if, on tapering, which can’t be good for gold," said Matthew Turner, an analyst at Macquarie Group Ltd. in London. "Gold has to get over QE and move on."

S&P GSCI

Gold fell 22 percent this year to $1,309.31 an ounce in London, heading for the biggest annual loss since 1981. The Standard & Poor’s GSCI gauge of 24 commodities lost 2.4 percent since the start of January and the MSCI All-Country World Index of equities gained 11 percent. The Bloomberg U.S. Treasury Bond Index fell 2.5 percent.

Charles Evans, Sandra Pianalto and Richard Fisher, regional Fed presidents in Chicago, Cleveland and Dallas, said this week that the central bank may be closer to tapering bond buying as the U.S. jobs market recovers. Evans is a voting member of the Federal Open Market Committee, while Fisher and Pianalto don’t vote on monetary policy. Jobless claims in the U.S. fell in the four weeks ended Aug. 3 to the lowest since November 2007, the Labor Department said yesterday.

Gold held in ETPs dropped to 1,946.92 tons yesterday, the lowest since May 2010, data compiled by Bloomberg show. The combined value of the holdings is now $81.9 billion, compared with $141.8 billion at the end of 2012. Almost $31 billion was pulled from ETPs backed by gold this year, according to BlackRock Inc. Investments in the SPDR Gold Trust, the biggest fund backed by bullion, are the lowest since 2009.

Mining Writedowns

Mining companies announced at least $21 billion in writedowns in the past two months. AngloGold Ashanti, the third- largest producer, reported a second-quarter net loss of $2.2 billion on Aug. 7, and said it would suspend its dividend and cut 800 jobs. Barrick Gold, the top supplier, said Aug. 2 it plans to sell, close, or cut output at 12 of its 27 mines. AngloGold is based in Johannesburg and Barrick in Toronto.

Physical demand is rebounding after gold fell below $1,300, Standard Bank said in a report Aug. 7. Bullion on the Shanghai Gold Exchange was about $26 more expensive than in London on Aug. 6, compared with a premium of less than $15 last week, indicating strengthening demand, the bank said.

Premiums for gold bars in India, the biggest consumer of the metal, rose to $45 an ounce in the past week from $25 to $30 a week earlier, Barclays Plc said Aug. 5. The government doubled a tax on inbound shipments to 8 percent this year and curbed financing to tackle a surge in demand after bullion entered a bear market in April.

Gold Vaults

Asian demand led banks from JPMorgan Chase & Co. to UBS AG to Deutsche Bank AG to offer gold-storage services in Singapore. Australia & New Zealand Banking Group Ltd. opened a vault that can hold 50 tons of metal last month.

Hedge funds and other large speculators cut net-long positions in gold by 6.5 percent in the week ended July 30, after boosting bullish bets in the four preceding weeks, U.S. Commodity Futures Trading Commission data show. Bearish short positions rose 6.8 percent, the biggest increase since the week ended June 18.

Eight traders and analysts surveyed by Bloomberg expect copper to rise next week, five were bearish and six neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, rose to a two-month high today as China’s industrial production expanded.

Six of 13 people surveyed expect raw sugar to fall next week, four were bullish and three were neutral. The proportion of bears was the highest in eight weeks. The commodity slid 13 percent to 16.92 cents a pound on ICE Futures U.S. in New York this year.

Grain Bears

Corn and wheat traders were bearish for the ninth time in 10 weeks. Eighteen of 28 corn analysts surveyed anticipated lower prices and nine were bullish. Fifteen of 25 wheat analysts expected price declines and nine were bullish. Soybean traders also were bearish, with 17 of 29 traders predicting declines.

U.S. farmers are expected to harvest record corn and soybean crops this year. The U.S. Department of Agriculture is scheduled to update its crop forecasts on Aug. 12. Corn futures tumbled 34 percent this year, while soybeans dropped 16 percent and wheat slid 16 percent.

"There’s really not a shortage of many key commodities out there at the minute so that’s a main fundamental reason why the market is turning bearish," said Tom Pugh, a commodities economist at Capital Economics in London. "You’ve seen corn and soybeans basically plummet as people realize that the record harvests in the U.S. are going to take place and that there’s going to be an abundance of supply."